1. The Sub-Committee on Lords' Conduct has investigated
the conduct of Lord Paul. The Sub-Committee's report is printed
as an Appendix to this Report.

2. The Sub-Committee's investigation into the
conduct of Lord Paul should be read in parallel with its investigations
in the conduct of Lord Bhatia and Baroness Uddin. All three cases
arise out of articles originally appearing in The Sunday Times,
and each raises similar issues. Each of the Sub-Committee's reports
contains similar background analysis (for instance, of the rules
governing the Members' Reimbursement Scheme[1]).

3. But, however similar the issues, the facts
of each case are wholly distinct and have required separate consideration.
The Sub-Committee, and we ourselves, have therefore prepared three
separate reports.

Process

4. The process followed in this case is summarised
in paragraphs 5-6 of the Sub-Committee's report. The original
allegations against Lord Paul appeared on 11 October 2009; a complaint
was made the same day by Angus Robertson MP. The initial investigation
was conducted by the Clerk of the Parliaments as Accounting Officer,
but was then suspended while a separate investigation was conducted
by the Metropolitan Police Service. On 3 March 2010 the Metropolitan
Police Service notified the Clerk of the Parliaments that a decision
had been made "to not proceed with the investigation at this
time". The Clerk of the Parliaments resumed his own investigation,
and on 5 March asked the Sub-Committee "to investigate and
determine the facts of the case".

5. The procedure in these cases follows that
agreed by the House in December 2008[2],
whereby the Clerk of the Parliaments can request the assistance
of the Sub-Committee in investigating complaints which he considers
"complex or serious". As a Sub-Committee of the Committee
for Privileges and Conduct, the Sub-Committee on Lords' Conduct
normally reports to the parent Committee. But, as this case was
referred to the Sub-Committee by the Clerk of the Parliaments,
the Sub-Committee reported to the Clerk of the Parliaments. He,
given the nature of the sanctions recommended by the Sub-Committee,
forwarded the report in turn to this Committee.

6. The Sub-Committee, following an investigation
which had been interrupted by the dissolution of Parliament, sent
its report to the Clerk of the Parliaments on 28 July. The Sub-Committee
also recommended that, in order to preserve confidentiality, the
Clerk of the Parliaments should not disclose the report to any
other person until late in the summer recess. He accordingly forwarded
the report to the staff of this Committee in late September, and
a copy was at once sent to Lord Paul, on 21 September. He was
at the same time notified of his right to appeal against the Sub-Committee's
findings to the Committee for Privileges and Conduct. He submitted
his appeal on 29 September, also indicating his wish to appear
in person before the Select Committee at its meeting on 11 October.

7. Although the Sub-Committee's report was forwarded
to this Committee in its entirety, certain matters covered in
it relate to the administration of the Members' Reimbursement
Scheme (for instance, the changes which the Sub-Committee indicates
were made to the Scheme in April 2009, referred to in paragraphs
20 and 42-43 of the Sub-Committee's report), rather than to the
privileges of the House or the Code of Conduct. It is for the
House Committee, as the body responsible for the Members' Reimbursement
Scheme, to take forward these matters, on which we make no recommendations.

8. Our responsibility is to address the conduct
of Members who are alleged to have breached rules agreed by the
House, and, where appropriate, to recommend sanctions to the House
as a whole. The House has previously resolved that it "possesses
the same disciplinary powers in respect of breaches of the Members'
Reimbursement Scheme as in respect of breaches of the Code of
Conduct or of other rules of conduct adopted by the House".[3]
It is a Member's responsibility to ensure that claims for expenses
are properly made, which includes an obligation to take reasonable
steps to ensure that amounts being claimed are properly payable
under the Scheme and that information provided in connection with
claims is complete and accurate. A Member who makes a claim without
taking such steps may be found to be liable to sanction by the
House.

The Sub-Committee's findings

9. The focus of the investigation has been Lord
Paul's use of the Members' Reimbursement Scheme from late 2005
onwards. In particular, the Sub-Committee considered whether during
this period Lord Paul correctly designated two successive properties
(until the end of July 2006, The Cottage, Bignell Park Hotel,
Chesterton, Oxfordshire, and from August 2006 The Grange, Beaconsfield,
Buckinghamshire) as his "main residence" for the purposes
of the Scheme.

10. Notwithstanding its name, the Oxfordshire
property is a one-bedroom flat in the Bignell Park Hotel, which
is owned by Lord Paul's company, Caparo Holdings. The minimum
requirement endorsed by the House Committee for determining whether
a property could be designated as a Member's "main residence"
under the Scheme is the requirement that it be visited for a minimum
of one weekend per month over the year when the House was sitting
and for periods during recesses. The Sub-Committee interpreted
the term "visit" in this context as requiring an overnight
stay. Lord Paul has freely admitted that he never spent a night
at The Cottage. The Sub-Committee therefore concluded that Lord
Paul wrongly designated The Cottage as his main residence.

11. The Grange in Buckinghamshire is a family
home, which Lord Paul contracted to buy in March 2006, designating
it as his main residence in August of that year. Since that time
Lord Paul has regularly spent weekends at The Grange, and the
Sub-Committee accepted that Lord Paul's designation of The Grange
as his main residence through the period in question met the minimum
requirement endorsed by the House Committee.

12. As a result of his designation of the Oxfordshire
property as his "main residence", Lord Paul was able
to claim sums under two separate headings within the Scheme. He
claimed night subsistence in respect of overnight accommodation
in London while away from his "main residence"; he also
claimed travel expenses in respect of journeys between his "main
residence" and Westminster.

13. Immediately after the original allegations
appeared, Lord Paul referred himself to the Clerk of the Parliaments
for investigation, and at an early stage in this investigation
he offered to repay any money wrongly claimed. With the assistance
of the Finance Department, Lord Paul calculated that he had claimed
£41,982 in night subsistence and travel expenses over the
period from January 2005 (when he first designated The Cottage
as his main residence) to July 2006. He repaid this sum (a greater
sum than the House could have required him to repay, given that
the investigation was only able to go back four years, to 11 October
2005) to the House in late 2009; there is no further money owing
to the House.

14. As the Sub-Committee acknowledged, as well
as repaying the money Lord Paul has also apologised, in his oral
evidence, for his mistake in wrongly designating the Oxfordshire
property and claiming money on that basis (Q 150, p 103). At no
stage since he was first contacted by The Sunday Times
has Lord Paul claimed that he ever spent a night in The Cottage.

15. Thus far there is broad agreement between
the Sub-Committee and Lord Paul. The difficulties in this case
arise in determining the third issue addressed by the Sub-Committee,
namely whether, given that the Oxfordshire property was wrongly
designated, Lord Paul acted in good faith in making his designation
and claims.

16. The Sub-Committee's view was that Lord Paul
did not act in good faith. The Sub-Committee stated that "no
reasonable person could hold Lord Paul's understanding of 'main
residence' in relation to the scheme". The Sub-Committee
therefore concluded "that Lord Paul's designation of the
Oxfordshire property was a deliberate misrepresentation of his
domestic arrangements made with the intention of enabling Lord
Paul to make use of the night subsistence element of the members'
reimbursement scheme" (paragraphs 57-58). With respect to
travel expenses, the Sub-Committee concluded that "Lord Paul
made the claims for the mileage allowance for journeys by car
from and to the Oxfordshire property with the intention of adding
verisimilitude to his designation of that property as his main
residence" (paragraph 60).

17. On the basis of these conclusions, the Sub-Committee's
recommendation was "that the House sanction Lord Paul by
requiring him to make a personal statement of apology to the House
and thereafter suspending him from the service of the House for
six months." (paragraph 63).

Lord Paul's appeal

18. Lord Paul has appealed against the Sub-Committee's
findings only on the third issue, namely that he acted in bad
faith. He states that, given his apology, his co-operation with
the investigation, and his prompt repayment of the money, the
Sub-Committee's sanction is based solely upon the finding that
he acted in bad faith.

19. Lord Paul points to the absence of guidance
during the period in question as to the meaning of "main
residence"; to his prompt and voluntary repayment of the
amount wrongly claimed and subsequent co-operation with the investigation;
and to his apology. He maintains that in the absence of an agreed
definition of "main residence", and given his cultural
background, his interpretation was at the time a reasonable one;
he further states that even if his interpretation were to be found
to be "unreasonable", this would be a "wholly inadequate
basis" for the Sub-Committee's finding that he acted in bad
faith, or engaged in "deliberate misrepresentation".
Finally, he compares his case with that of Lord Clarke of Hampstead
(as indeed does the Sub-Committee at paragraph 62), from whom
only an apology was required, and argues that he is being treated
harshly in comparison. He asserts that "there are a number
of [other cases], involving in some cases much greater amounts
of money, which have I believe not even been investigated".

20. Lord Paul appeared before the Select Committee
on 11 October 2010. A full transcript of his evidence is printed
in this volume (see p 110). The essence of his appeal is set out
in his opening statement:

"The basic facts are not in dispute. I made
claims which, with the benefit of hindsight, I should not have
made. For that I apologise. As soon as I appreciated my error,
I volunteered and made repayments. I never pretended to anyone
that, in the event, I spent nights at the property in question.
It was, however, a residential property of mine that was available
to me. It is all a matter of interpretation as to what constitutes
a main homea matter of interpretation that may differ between
persons with, for example, different cultural backgrounds. I am
now one of those who disagrees with my interpretation at the time
both in relation to the main residence and in relation to the
journeys. But I most steadfastly maintain that these were entirely
honest interpretations on my part." (Q 2)

The views of the Committee

21. We agree with Lord Paul that the Sub-Committee's
finding that he acted in bad faith is the key issue in the appeal
and in the Sub-Committee's report. There is no question that Lord
Paul should not have designated The Cottage as his main residence,
and that he was wrong to claim night subsistence and mileage allowances
in respect of that property.

22. Thus Lord Paul's motivation lies at the heart
of the case and his Appeal. The Sub-Committee's analysis of his
motivation is set out in paragraphs 54-58 of the report. The key
conclusions are as follows:

57. Even if Lord Paul's definition of "residence"
were reasonable, his lack of regard to "main" is unreasonable.
We consider that no reasonable person could hold Lord Paul's understanding
of "main residence" in relation to the scheme.

58. We find that Lord Paul's designation of
the Oxfordshire property was a deliberate misrepresentation of
his domestic arrangements made with the intention of enabling
Lord Paul to make use of the night subsistence element of the
members' reimbursement scheme.

23. In oral evidence before us, Lord Paul repeated
his claim that "I genuinely believe that a place that is
available to me for living is my residence" (Q 7). Such an
understanding essentially empties the term of meaning. Nevertheless,
Lord Paul went so far as to apply this understanding even to his
current "main residence" in Buckinghamshire, which the
Sub-Committee, and we, accept satisfies the minimum criteria for
designation: "I still do not consider in real terms that
my house in Beaconsfield is a main residence. To me, it is a place
where I love to go whenever I can and I like to spend time with
my children and grandchildren, but I do not differentiate between
my London home and that residence." (Q 7) If this were true,
it would seem that Lord Paul's designation of one or other residence
as his "main residence", properly or improperly, is
a matter largely of chance.

24. Lord Paul explained his interpretation of
the term "main residence" by reference to his cultural
background. He insisted that "anyone coming out of India
would not understand what main residence means" (Q 8). He
accepted that he had "not once" looked at the guidance
on the back of the claim forms (Q 22). Yet he clearly had a good
understanding of domiciliary status (QQ 11-17).

25. In summary, Lord Paul's understanding of
the term "main residence" is barely an understanding
at all; it demonstrates rather a continuing failure to understand
that the term has any specific meaning that may be applied to
his personal circumstances. We therefore endorse the Sub-Committee's
conclusion that "no reasonable person could hold Lord Paul's
understanding of 'main residence' in relation to the scheme".
The Sub-Committee's further conclusion that Lord Paul's designation
of the Oxfordshire property as his main residence must have been
done in bad faith is entirely understandable. We therefore
dismiss his appeal, except to the extent indicated below.

26. It is our responsibility, in reviewing the
Sub-Committee's findings, not only to consider specific grounds
of appeal, but to "decide whether, on the balance of probabilities,
we endorse the conclusions of the Sub-Committee".[4]
On this occasion we have borne in mind, on the one hand, the fact
that Lord Paul's definition of "main residence" was
and is inherently unreasonable, and that, as a Member of the House
and a successful businessman, he must be presumed to act as a
reasonable person. On the other hand, we are aware that he has
at no stage since the allegations first appeared sought to misrepresent
his connection with the Oxfordshire property, for instance to
pretend that he ever stayed there. It is a matter of fact that
he immediately referred his case to the Clerk of the Parliaments
and has co-operated with the investigation throughout; that he
has repaid all money wrongly claimed (a larger sum than that covered
by the Sub-Committee's investigation); that he has repeatedly
apologised for his mistake; and that he persists in applying the
term "main residence" in ways that could be interpreted
unfavourably to himself. Lord Paul's actions throughout the investigation
have been consistent and, so far as we can tell, honestly meant.

27. We do not feel justified in finding, on
the balance of probabilities, that Lord Paul acted dishonestly
or in bad faith. However, his actions were utterly unreasonable,
and demonstrated gross irresponsibility and negligence. They therefore
render him liable to sanction by the House.

28. In mitigation, Lord Paul has apologised and
repaid the money wrongly claimed.

29. We recommend that Lord Paul be suspended
from the service of the House for four months, starting on the
date on which any suspension motion is agreed by the House.